APRA Updates Standard for Reporting Credit Exposures, Provisions

The draft ARS 220.0 is intended to align with the updated Prudential Standard APS 220 Credit Risk Management, which will come into effect from 1 January 2022.

APRA (Australian Prudential Regulation Authority) has released a consultation proposing to update Reporting Standard ARS 220.0 Credit Risk Management.

The draft ARS 220.0 sets out requirements for the provision of information to APRA relating to an ADI’s credit exposures and provisions. It is intended to align with the final version of the Prudential Standard APS 220 Credit Risk Management, released in December 2019, which will come into effect from 1 January 2022.

In a letter to ADIs, APRA said it is designing new data collections which are based on data models that can be used for multiple purposes and can be changed or extended without wholesale redevelopment. By collecting data at a granular level, APRA aims to reduce the regulatory data burden on the industry, by minimising duplication of data collections and reducing the number of ad-hoc data requests in future.

The ARS 220.0 data model uses a financial instrument level concept-dimension model. Compared with the existing collection, the draft ARS 220.0 will collect more detailed data on ADIs’ credit exposures and provisions.

In parallel, APRA intends to remove a number of items from the current reporting forms, including detail on interest income and certain breakdowns of impaired and past due items. APRA has also removed the requirement for ADIs to categorise their prescribed provisioning exposures into separate time buckets.

APRA is proposing a risk-based approach to reporting based on the complexity of the ADI where less sophisticated ADIs have reduced reporting requirements, in a bid to balance burden with the supervisor requirements.

To align with the commencement of the new APS 220, APRA proposes that the first reporting period for the new data collection will be for the quarter ending 31 March 2022.

The proposed implementation of ARS 220.0 will also coincide with the start of APRA’s new data collection solution APRA Connect, which was due to go live as a replacement for D2A (Direct to APRA) last month but was deferred in March due to Covid-19.

APRA intends that entities will submit ARS 220.0 data in APRA Connect and expects that ADIs will be able to submit data via manual entry, upload of XBRL or Microsoft Excel files.

APRA’s consultation letter and the draft reporting standard are open for comment until 28 January 2021.

Regulation Asia is hosting a webinar on 18 November covering credit risk and collateral management, and drawing from prudential standard APS 220. Find out more here.

 

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